If you want faster loan application and approval, why not try other alternatives in lending? A good example is a hard money loan that’s often considered a last resort when it comes to real estate transactions. The financiers are often in the form of companies and individuals and not the traditional banks, so they may do some things differently. See more info about mortgage loans on this page here.
They are going to appraise the value of the property as well as its selling price after a renovation instead of relying on the creditworthiness of the individual borrower. They are offered by private investors who require the house to be used as collateral. When something goes wrong, they can seize the house, sell it to the highest bidder, and get their money back.
It’s an ideal situation for those fixer-uppers who need money quickly and want to sell out or people who don’t qualify for a standard mortgage. Fortunately, there are loans for fixer-uppers that are available as long as they know where to go. These houses may need to be redesigned or reconstructed, and the investor will flip it and find a buyer who will be interested in the property at a higher price.
Interest Rates Typical of These Transactions
One thing is for sure, and you can often expect a higher annual percentage rate with these loans compared to when you’re getting a traditional mortgage from a housing government entity or a bank. It often ranges around 10% to 20% depending on the transaction and the overall price of the house, and they are considered to be more expensive.
However, the figures generally don’t matter with short-term investors and other flippers because they are confident that they can pay off the loan rather quickly. It makes the overall deal good, and they are going to get back what they’ve spent in less time. Therefore, it makes sense for them to get some quick funding rather than waiting for a very long time to get approved for a mortgage. After all, their primary attractive feature is speed, and if the funds come through, the flippers can use the money for whatever they want.
Uses to Know About
Developers and real estate investors find them to be lucrative options where they can arrange a loan quicker when they find an excellent property. With loans for fixer-uppers, you can get the funds in as little as 10 days, and the amount can be up to 75% of the home’s appraised value. Terms are generally shorter, and they can range from six to eighteen months.
Reselling the real estate is the primary goal here, and this is only done after the renovations. Most investors give them a maximum of one year or sooner in order to recoup their investments. A higher interest rate is often offset by the fact that the borrowers intend to pay the costs and the owed amount rather quickly, so it won’t balloon out into something bigger.
It’s also ideal for individuals who have poor credit ratings but have built substantial equity in their homes. Hard times can hit whenever you expect them the least, and there are people who really need short-term financing to cover an emergency or a medical expense. Others find these temporary fixes to avoid foreclosures in their beloved homes where they are confident of being able to repay the owed amount over time.
What are the Advantages of Getting from a Private Financier?
Quicker Approval Process
As mentioned, this is for people who need money now and fast. This is a great source of funding where the application and the approval can take around 24 hours without any problem. You can check your bank account and receive the funds within 72 hours in some cases, depending on the financier and find info about hard money loans on this post: https://en.wikipedia.org/wiki/Hard_money_loan.
Although the three-day period isn’t necessarily a guarantee, this is still a lot faster compared to traditional institutions like banks, where their processing can take weeks or even months to get approved. With these traditional options, you often need to submit a ton of paperwork or documentation, and even then, this isn’t a guarantee that you’ll be approved.
Stricter guidelines, thorough underwriting checks, and background investigation can drag your application, and some flippers might not be able to take advantage of a good market opportunity with these processes. However, this is a whole different story with asset-based transactions where lots of homes can be flipped during a bull market because of the easier process.
A More Local Setting
These financiers generally operate locally where a lot of other businesses already know them. This also means that they are familiar with your area, and they understand the interest rates and home appraisal values in your specific market. It enables them to offer a custom solution that can design the needs of a fix-upper.
Meet them in person and go to their office whenever you have questions. Discuss your options personally instead of just talking to someone over the phone. Know that they can be beneficial to your needs because they can offer an interest rate according to the collateral’s value. Any in-person meeting can also create trust and rapport where lenders can often build relationships with the flippers. Whenever they have future projects in mind, they know that they can rely on a company that will definitely be willing to fund them in their ventures.
Get the Money for Construction and Repairs
Getting an advance to repair the kitchen and the bedrooms can be advantageous because the house is more likely to sell at a higher price when someone can do the renovations really well. If you’re looking for flexible terms, you should look no further than a hard money lender.
They are going to give you the money needed to start the project before the completion, and it can be helpful to pay for the costs upfront so there can be no headaches later on. Also, when there are available funds, there can also be faster completion of the project with only a few paperwork needed.
